BoB suffers setback in P28m legal dispute
Mpho Mokwape | Friday September 18, 2015 18:00
The fraud charges stem from allegations that after the default judgment was issued on the basis that a notice to defend the matter was not filed on time, Collins Newman & Co then allegedly went on to forge court stamps to make it appear as if such action had been taken.
In a ruling made at the Gaborone High Court on Wednesday, Justice Zain Kebonang threw out persuasions by the central bank’s lawyers to have the forgery charges dealt with separately either by the Law Society of Botswana or a prosecuting authority while the court confine itself to dealing with legal arguments.
BoB, through Collins Newman & Co, had argued that the registrar should have not granted the default judgment without instructions from a learned judge and that allegations of fraud were not material to the legal questions raised on the default judgment.
However, Justice Kebonang in his ruling differed with the BoB on the issue of separating the two issues, saying that where allegations of fraud have been made, public policy demands that rather such allegations be tested.
He explained that if the court were to close its eyes to the possible forgery, it would seem like it was endorsing and rewarding potential misconduct arguing that what was at stake was the integrity of the judiciary.
“The integrity of the judiciary will be compromised if the court was to ignore such strong allegations of wrong doing,” he said. “It would in fact amount to aiding and abetting a potential wrong. Public policy, in my view, simply requires that there must be an investigation into the allegations of fraud.”
The default judgment was issued after Michin and Kelly acting for EBC Guernsey, creditors of the failed Kingdom Bank, sued the Bank of Botswana for about P28.5 million due from the $2.5 million and 160,329 Pounds the company says it lost when the offshore bank was liquidated.
According to papers filed by Michin and Kelly, BoB deputy governor, Moses Pelaelo said in his founding affidavit that the appearance to defend had been filed on June 19, 2015 though the court stamp reads June 18, 2015.
“The respondent disputes the fact that an appearance to defend was delivered on behalf of the applicant. The respondent attorneys had not been served with a copy of the appearance to defend and neither the original or a copy there have been found in the judge’s file or in the court file. The respondent relies on the evidence of an expert witness who examined the purported documents and concluded that the appearance to defend is not an authentic document. This, of course, is a real dispute of fact involving allegations of fraud and oral evidence is required to resolve the issue,” said EBC Senior Counsel Panayiotis Stais.
In his ruling, Kebonang concurred with Stais and said if any justice was to be served, the matter must be referred to oral evidence on the disputed facts. “It would be inconceivable and unjust to decide this application on narrow technical legal points when there exists such dispute which goes in the heart of our legal system and the very essence of the administration of justice,” Justice Kebonang said.
The judge also tore into Pelaelo for offering two different statements in his affidavits.
“From claiming personal knowledge, and asserting that an appearance to defend had been filed, Moses Dinekere Pelaelo does the unthinkable in his supplementary replying affidavit. He now passes the blame of any wrong doing to his attorneys,” said Justice Kebonang.
Earlier, senior counsel for BoB Christopher Loxton had argued that the question of the authenticity or otherwise of the appearance to defend did not arise in circumstances where questions of law fall to be determined.
He said his client was entitled to seek rescission on the basis that the default judgment was not properly granted irrespective of the delivery of the appearance to defend.
Loxton maintained that the issue of appearance was not a key issue but that the registrar had no powers to grant the default judgment.
“EBC’s attorneys improperly persuaded the registrar to exercise the powers which he did not possess and forced him to act unlawfully,” Loxton said. He had argued that if there were any irregularities regarding filing of notice of appearance to defend it should be reported to the relevant authorities to investigate.
Kingdom Bank was closed in May this year after an inventory of its balance sheet compiled by Delloite Botswana found the offshore bank’s liabilities to be outweighing its assets by approximately $17 million (P171 million), leading to the BoB, as the regulator, to petition the courts for an order to liquidate the bank.